Picture this: you’ve ditched owning a car and paying a fixed lease, and instead, you’re treating cars like you do with Netflix or HelloFresh – through a subscription. Having a car available whenever you need it, with all the costs covered, no more surprise bills for maintenance, insurance, or registration.
A commissioned research report suggested that 69% of Gen Z and about half of millennials indicated a preference for car subscription. Conventional car ownership gets expensive when circumstances change, and many first time owners are still unsure about the real expenses. Meanwhile, companies like Carly (ASX: CL8) are changing the game by offering complete packages that cover registration, insurance, maintenance, and roadside assistance.
These standout features ended up boosting the car subscription company’s FY23 earnings, resulting in a 82% rise in subscription revenue from $1.25m in FY22 to $2.1m. The average subscription revenue per customer went up by 9.4%, and gross profit per subscription increased by 35.9% compared to FY22 mainly due to successful price adjustments.
Additionally, offering more premium subscription plans and retaining a bigger share of the subscription earnings from owned/leased vehicles, as opposed to those owned by third parties, also played a role in this growth.
In FY23, Carly experienced growth in active subscriptions, maintaining an average customer retention period of over 5.2 months throughout the year. Keeping the fleet in use was important, and it averaged 86% utilisation. Carly’s online verification and tracking systems made fleet management safer and earned them a $60,000 insurance rebate for low claims.
Historically reliant on third-party owned vehicles, Carly shifted post-Covid-19 to buying and financing its own vehicles, recording a 285% increase in the size of its owned and financed fleet to a total of 320 vehicles. Thirty-four percent of which are asset-light (meaning Carly has relatively little ownership of assets) vs 77% at the end of FY22.
This strategy has managed to yield higher revenue and gross profit per vehicle compared to the third-party owned fleet. Subscription revenue from owned and financed vehicles reached 64% of total revenue compared to 31% in FY22.
Commenting on the Company’s FY23 performance, Carly CEO Chris Noone commented, “The strong growth in revenue and gross profit confirms that our strategy is right and we are executing rapidly and effectively. We say what we will do, and we do it.”
“Our key utilisation, CPA and efficiency metrics are on target, and combined with our ability to scale the vehicle fleet rapidly whilst maintaining stable corporate and administration expenses, provides a solid foundation for accelerated, profitable growth in FY24.”
Noone further added that Carly plans on capitalising significant opportunities in the consumer, business, government and electric vehicle segments while also supporting automotive OEMs and dealers to expand into the car subscription market.
Carly recorded a Net Loss After Tax (NLAT) of $3.14m, compared to $3.01m NLAT incurred in FY22. The Company ended the financial year holding $1.6m cash at bank.
In March 2023, Carly secured access to an asset finance facility of up to $10m (subject to meeting certain financial covenants), bringing total potential available facilities to $13.2m. This was an increase of $11.7m since FY22. Carly has drawn $2.2m of the facility as of 30 June 2023, and will continue to draw down on the facility in FY24 to further expand its owned and financed fleet of vehicles. The Company continues to seek further asset finance facilities.
Moving on to FY24, Carly will seek to further accelerate growth of the vehicle fleet, increase marketing and focus business development on opportunities in the consumer, business, government and not-for-profit segments. Carly will leverage opportunities to facilitate the transition to electric vehicles.
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